HR Metrics

Moving Beyond Absenteeism

& Turnover Stats
Overview
Agenda

1. HR Metrics – An Introduction
2. What CEO’s expect from HR
3. Becoming World-Class HR: Setting up
measurements
4. Metrics for HR
5. Wrap-up
HR Metrics – An Introduction
Case Study
A CEO confides to the HR consultant that he is
very frustrated with the HR Division of his
company. There seems to be a steady stream
of recruits being interviewed but the output and
quality of work coming out of one of the
company’s critical departments is declining and
there is a steady change in faces in the
department.
HR Metrics – An Introduction
Case Study
The CEO is aware that HR is collecting
information on absenteeism and turnover and is
conducting exit interviews however nothing is
reported back to him. The strategic and
operational plan of the company is hinged on
the success of the department in question. He
is beginning to believe that HR is not supporting
the strategic agenda of the company and is
talking about changing the leadership in the HR
Division.
HR Metrics – An Introduction
Why should we care about HR Metrics?
• People costs can constitute half or more of a
company’s expenses but 57 percent of
companies don’t track the impact of HR on their
business
• Metrics allow fact-based decision making
• Metrics can change behaviour when
communicated throughout a company
• Metrics clarify what is important.
HR Metrics – An Introduction
Why should we care about HR Metrics?
• HR should care about Metrics because CEO’s
and Senior Executives care about the impact of
HR on performance… and they care about
numbers and tangibles.
• Metrics that are aligned with business objectives
and operational capability are business-
intelligence tools for HR – Metrics track the
impact of HR on the business and behaviour of
people to improve performance.
HR Metrics – An Introduction
Some reasons why HR hasn’t been measured:
• We didn’t have to – Senior executives accepted
HR as a ‘soft’ unavoidable cost of doing
business
• There was no sound metric starting point –
Although headcount, HR staff per 100, and cost-
per-hire were considered common HR ‘metrics’,
they don’t stand up to hard business questions
and challenges and therefore support the belief
that HR couldn’t be measured.
HR Metrics – An Introduction
Some reasons why HR hasn’t been measured:
• Can’t measure strategy – In the 90’s, most
metrics tried to measure strategy, which cannot
be measured. Metrics should measure
outcomes and results associated with
objectives.
• Too complex – Many of the HR metrics
formulations developed were too complex to
allow ongoing measurement.
HR Metrics – An Introduction
A Primer on HR Metrics
A Metric is using a number to enhance a story or
argument – an Accountability Tool
“HR was busy. We filled 45 out of 50 vacancies
over a 6 month period.”
“HR Programs are working. Company Turnover
in the last quarter decreased from 8% to 6%.”
“Absenteeism this month is 10 days versus 15
days last month.”
HR Metrics – An Introduction
A Primer on HR Metrics
A better and more interesting story if the following
questions are answered:
How many of the 50 vacancies were key jobs?
How long, on average, did it take to fill the jobs?
How satisfied were the managers with the
recruitment process and results? How many of
the new hires reached performance level after 3
months?
HR Metrics – An Introduction
A Primer on HR Metrics
• Metrics can be internal to HR with an
Operational and Task Focus
• How HR Operates: This is the most common
approach used today.
Examples:
We filled 45 out of 50 vacancies.
We conducted 20 exit interviews this year.
HR Metrics – An Introduction
A Primer on HR Metrics
• How HR impacts on the organization -
Strategic Metrics: Consider impact of HR
initiatives across the organization and links
Metrics to the Business Strategy
• Contribution of HR to make the business model
a reality. Goes beyond activity-based
measurements and focuses on metrics that are
in synch with business goals.
• These metrics are reported to the CEO.
HR Metrics – An Introduction
Example: Strategic Focus: Recruitment of best
in marketplace
HR filled 45 out of 50 vacancies. After 6 months, 40 of
the 45 passed probation and performance ratings
ranged from Meets expectations to Outstanding. These
metrics show that HR recruitment processes are
resulting in quality hires for the company.
80% of managers surveyed were more satisfied with
the recruiting process than last year as a result of
quality hires and retention of top performers.
HR Metrics – An Introduction

Example: Strategic Focus: Retention of top

talent
The turnover rate of our top 25% rated employees
is below 5%.
Employee Survey results show that the
performance bonus system put in place to
recognize top rated employees as well as flexible
scheduling were the key reasons for the drop in
turnover. When compared with our industry, we
are well above our competitors.
What CEO’s expect from HR
HR Organizational Effectiveness or Strategic
Metrics
• CEO’s want to know how HR gives them a
measurable competitive advantage over their
competitors.
• Dr. John Sullivan’s research indicates 15 common
key questions. A representative sample are
presented to illustrate the nature of these
questions.
What CEO’s expect from HR
CEO’s List of HR Metric Questions
1. Do we attract and hire the very best people we
can afford?
2. Do we retain our key/most productive people at
a higher rate than our best competitors/
3. Are the people we have the most productive in
the industry?
4. Do we fix our problem employees rapidly or get
rid of them if they are too expensive to fix?
What CEO’s expect from HR
CEO’s List of HR Metric Questions
5. Are our employees satisfied and does this
impact productivity and retention?
6. Is our HR department efficient and does it
continually improve?
• HR customer satisfaction data
• Response time to requests
Becoming World-Class HR
Setting up measurements for HR

• Important to meet and consult with managers and

internal customers to introduce HR metrics into an
organization.
• Also, to clarify and understand the questions and
needs of the CEO and other internal customers
related to company strategy and HR
Becoming World-Class HR
Steps to Set up Metrics for HR
1. Get out in the field to get input
• It is critical to understand the business objectives
of the company overall and those of the individual
business units.
• Business units are your constituents. Ask them
what HR or recruiting results will be necessary to
help them achieve their objectives.
Becoming World-Class HR
Steps to Set up Metrics for HR
2. Get HR in step with a complementary set of
objectives
• Once you know the goals of the various business
unit, you can develop objectives with supporting
metrics to align HR with them.
• For example, if the strategic plan calls for expansion in
production and the business plan requires 200 additional
employees in the next two years, HR needs to plan a
recruitment strategy that builds a pipeline of potential talent
and metrics to report on progress.
Becoming World-Class HR
Steps to Set up Metrics for HR
3. Get your IT department involved
• Determine up front what you can and cannot track
as well as how you’ll collect and deliver the
metrics that matter.
• Sophisticated IT systems can deliver dashboards
and scorecards for HR metric data.
Becoming World-Class HR
Steps to Set up Metrics for HR
4. Get everyone comfortable with the data
• Sell the metrics approach as a ‘business
performance-enabling’ program.
• Frequent communication helps to underscore the
significance of the metrics program and helps to
refine it.
Becoming World-Class HR
Steps to Set up Metrics for HR
5. Get started
• You can spend months debating and analyzing
the finer points of implementing a metrics program
but its better to get started and refine as you go.
• A metrics program is never ‘done’ – it needs
constant evaluation, tweaking, and sometimes,
wholesale change. As the business changes, so
does what you need to measure.
Becoming World-Class HR
Steps to Set up Metrics for HR
• Develop metrics that reflect the company culture
and are similar to those reported in the annual
report
• Keep metrics simple
• Strategic Metrics should be limited to six.
• Have Strategic Metrics approved by CEO.
• Develop trend lines for comparison. Compare with
industry.
Becoming World-Class HR
Back to our Case Study – Using Metrics
In the case of our frustrated CEO:
• HR needs to know what the business plan is and
the importance of XY department in achieving
overall business targets. Discussions with the
CEO and senior executive will clarify the company
objectives and allow HR to align HR objectives.
• HR needs to regularly gather feedback on how
satisfied the CEO and senior executive is with HR
services – including recruitment.
Becoming World-Class HR
Back to our Case Study – Using Metrics
• HR needs to develop recruitment and turnover
metrics that indicate the quality of hires and the
reasons for turnover. Are the low performers or
top performers leaving? What are the reasons for
turnover? – pay, supervisor, poor fit?
• Communicating the HR metrics to the CEO will
clarify the questions he has, reduce his frustration
and concern, and demonstrate the value of HR in
achieving the business objective.
Metrics for HR
Organizational/Strategic Metrics
1. Revenue per employee: Revenue / Total # of FTE
2. Productivity Ratio: What is our output (productivity) for
every dollar of people costs spent?
3. People Profit: The number of people dollars spent in
order to get one dollar of profit.
4. Employee Pulse/Satisfaction: What are employees
saying?
People costs include salaries, benefits, training & HR Dept
costs
Metrics for HR
Metrics for Employment
1. On-the-job performance of new hires: Have we hired
more ‘productive’ people this year than last year? What is
new hire time to productivity?
2. Failure rate: What % of the people that we hire are a
mistake? What happens to them? Track number of
employees who leave voluntarily before probation or do
not meet probation.
Metrics for HR
Metrics for Employment
3. Average tenure of those who are hired
4. How many people do we take from our competitors?
5. How satisfied are managers and applicants with our
recruitment process and results? – Service satisfaction
survey to gather feedback – sampling – mystery shoppers
Metrics for HR
Metrics for Retention

1. What is the turnover rate of our key/top performers?

Compared to our competitors?
2. What is the turnover rate of bottom performers?
Metrics for HR
Metrics for Compensation

1. Do pay increases increase productivity? What impact does

a 1% increase in salary have on product produced?
2. Do highly paid people produce more $ of output (relative to
their pay?)
3. Is it the $ that causes people to leave (stay?)
4. Which benefit impacts attraction, productivity and retention
the most (per $ spent)?
Metrics for HR
Metrics for Employee Relations

1. Number of complaints filed per employee per period of

time
2. Number of and percentage of turnover attributed to ER
conflicts
Metrics for HR
Metrics for Training

1. Which training programs have the highest impact on

productivity?
2. If you increase training hours in a department, does
productivity increase proportionately? What is the percent
increase in performance as a result of every $1,000 spent
on training?
3. If you increase leadership training, does employee
satisfaction increase?
Sources for Metrics

- The Saratoga Institute – useful source of formulas

www.saratoga-institute.com
- Staffing.org
www.staffing.org
- Dr. John Sullivan
www.drjohnsullivan.com
Wrap Up

Questions?